Czech Republic, September 8, 2025
News Summary
Industrial production in the Czech Republic strengthened, driven by broad gains in motor vehicles, machinery, chemicals, pharmaceuticals and fabricated metals. New orders rose notably, with domestic demand especially strong, while construction output and the value of building permits jumped, signaling further activity ahead. Exports outpaced imports, narrowing the goods deficit, supported by vehicles and machinery. Employment in industry eased slightly while construction jobs ticked up; wage growth showed modest moderation. The defense sector is expanding and absorbing capacity from automotive shifts. Overall, the data point to a favorable near-term outlook for exporters and continued economic momentum.
Czech industrial growth picks up in July as construction stays strong
July data show the Czech economy gaining momentum: industrial output rose, new orders climbed and construction activity remained robust. Working-day adjusted industrial production increased by 1.8% year-on-year and by 0.8% month-on-month in July. On an unadjusted basis, output was up 4.9% year-on-year, beating expectations and signaling a broader pickup across factories.
Where growth came from
Gains were broad-based across sectors that form the backbone of local manufacturing and supply chains. Strong contributions came from motor vehicle production, machinery, chemicals and plastics, pharmaceuticals and fabricated metal products. A marked rise in the value of new orders — 6.6% year-on-year in current prices and 2.9% month-on-month — points to rising demand for factory output ahead.
Domestic demand powering orders
Domestic new orders jumped by 13.0% year-on-year, while orders from abroad rose by 2.9% year-on-year. The motor vehicle sector was the dominant driver of the headline increase in order books; part of the large annual rise reflects a low comparative base from the prior year, contributing to an approximately 15% annual increase in automotive orders. Several manufacturers of transport equipment also secured significant long-term contracts, helping to lift future production prospects.
Jobs and wages
Despite rising output and orders, the average number of employees in industry fell by 1.9% year-on-year in July. Monthly nominal wage growth in industry eased to 5.0% year-on-year, a softening seen as part of monthly volatility rather than a break in a longer-term trend toward robust wages. In construction, employment edged up by 0.6% year-on-year while average wage growth slowed to 3.8% year-on-year.
Construction remains a bright spot
The construction sector delivered a strong performance, with output up 10.1% year-on-year and 1.0% month-on-month in July. The sector’s expansion is being described as still in its growth phase, reflecting healthy investment and activity across public and private building. The indicative value of building permits climbed by a striking 37.9% year-on-year, suggesting more projects entering the pipeline.
However, residential activity shows mixed signals: the number of dwellings started was 9.2% lower than a year ago, and completions were 13.4% lower. These contrasts suggest timing and backlog effects: many projects have permits and contracts in place, but starts and completions can lag as construction schedules and materials or labour constraints play out. Housing demand appears not yet saturated despite ongoing gains in home prices.
Mortgages and household behaviour
New mortgage lending reached a record level in the second quarter of the year when excluding the pandemic-era spike. This surge may reflect households trying to lock in favorable rates ahead of a possible pause in policy moves, and it also underlines sustained appetite for housing among buyers.
Trade and export outlook
Preliminary foreign trade figures show a goods deficit of CZK 1.7 billion in July, a narrower shortfall than a year earlier by CZK 5.5 billion. Exports grew by 4.7% year-on-year while imports rose by 3.1% year-on-year. A higher surplus in trade of motor vehicles, other transport equipment and machinery helped improve the balance. Solid new orders point to a favorable short-term outlook for exporters.
Context and outlook
Analysts view the July results as evidence that industry may be bottoming out and aligning with strong household consumption and construction to support growth. The construction sector’s sizable permit pipeline and steady output gains suggest that building activity will continue to be a key growth engine in the near term. Overall, the economy looks to be moving forward on a reasonably solid footing.
Longer-term and structural notes
The country’s industrial base has deep roots in diversified manufacturing and a skilled workforce, factors that help in adapting to shifts across sectors. Recent turbulence in the automotive segment — including a drop in vehicle production earlier in the year — has coincided with increased activity in defense-related manufacturing, which has been expanding output and hiring since 2022. This adjustment in industrial composition is reshaping where jobs and investment flow, with retraining needs generally described as modest where workers transition between related factory roles.
Frequently asked questions
Q1: How big was the July industrial rebound?
A: Working-day adjusted industrial production rose by 1.8% year-on-year and 0.8% month-on-month; unadjusted output climbed 4.9% year-on-year.
Q2: Which sectors drove growth?
A: Motor vehicles, machinery, chemicals and plastics, pharmaceuticals and fabricated metals were the main contributors.
Q3: What is happening in construction?
A: Construction output grew 10.1% year-on-year and 1.0% month-on-month in July. Building permits rose 37.9% year-on-year, though dwelling starts and completions were down compared with a year ago.
Q4: Are new orders strong enough to support future output?
A: The value of new orders rose 6.6% year-on-year with domestic demand especially strong (+13.0%), suggesting a favorable outlook for production in coming months.
Q5: What about employment and wages?
A: Industry employment slipped 1.9% year-on-year while industrial wage growth eased to 5.0%. Construction employment increased slightly and wages there grew by 3.8% year-on-year.
Key figures and features at a glance
| Feature | July change | Notes |
|---|---|---|
| Industrial production (working-day adjusted) | +1.8% y/y | Also +0.8% month-on-month; unadjusted +4.9% y/y |
| New orders (value) | +6.6% y/y; +2.9% m/m | Domestic +13.0%; foreign +2.9% |
| Construction output | +10.1% y/y; +1.0% m/m | Permits +37.9% y/y; starts -9.2%; completions -13.4% |
| Employment | Industry -1.9% y/y; Construction +0.6% y/y | Wages: Industry 5.0% y/y; Construction 3.8% y/y |
| Trade | Exports +4.7% y/y; Imports +3.1% y/y | Goods deficit CZK 1.7bn in July, narrower than a year earlier |
Note: Figures are for July and reflect year-on-year and month-on-month changes. Data capture manufacturing, construction and trade developments and are intended to summarize recent trends for industry and building activity.
Deeper Dive: News & Info About This Topic
Additional Resources
- ING Think: Czech industry joins the growth pack
- Wikipedia: Economy of the Czech Republic
- Encyclopaedia Britannica: Czech Republic — Economy
- Google Search: Czech Republic economy 2025
- MLex: USITC preliminarily says Indian, Czech freight rail couplers threatened industry
- Google Scholar: Czech freight rail couplers USITC
- Deutsche Welle: Are weapons — not cars — the future engine of the Czech economy?
- Encyclopaedia Britannica: Czech defense industry
- ASDNews: BAE rolls out newest combat vehicle for Czech army
- Google News: BAE combat vehicle Czech army
Author: Construction TX News
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